Becker v. Comm'y Health Sys., Inc..

CourtWashington Supreme Court
DecidedSeptember 17, 2015
Docket90946-6
StatusPublished

This text of Becker v. Comm'y Health Sys., Inc.. (Becker v. Comm'y Health Sys., Inc..) is published on Counsel Stack Legal Research, covering Washington Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Becker v. Comm'y Health Sys., Inc.., (Wash. 2015).

Opinion

This opinion was flied for record

-~ :R. carpeni9i Supreme Court Clark

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

GREGG BECKER, ) ) No. 90946-6 Respondent, ) ) v. ) EnBanc ) COlVlMUNITY HEALTH SYSTEMS, INC. ) d/b/a COMMUNITY HEALTH SYSTEMS ) PROFESSIONAL SERVICES ) CORPORATION d/b/a COMMUNITY ) HEALTH SYSTEMS PSC, INC. d/b/a/ ) ROCKWOOD CLINIC P.S.; and ) ROCKWOOD CLINIC, P.S., ) ) Petitioners. ) ___________________________) Filed SEP 1 7 2015

JOHNSON, J.-This case involves the "jeopardy" element of the tort for

wrongful discharge against public policy and whether the Sarbanes-Oxley Act of

2002 (SOX), 18 U.S.C. § 1514A, or the Dodd-Frank Wall Street Reform and

Consumer Protection Act (Dodd-Frank), 15 U.S.C. § 78u-6, bar Gregg Becker

from recovery under the tort claim. This is one of three concomitant cases before

us concerning the "adequacy of alternative remedies" component of the jeopardy

element. See Rose v. Anderson .Hay & Grain Co., No. 90975-0 (Wash. Sept. 17,

2015), and Rickman v. Premera Blue Cross, No. 91040-5 (Wash. Sept. 17, 2015). Becker v. Cmty. Health Sys., Inc., No. 90946-6

Our recent holding in Rose instructs that alternative statutory remedies are to be

analyzed for exclusivity, rather than adequacy. Under that formulation, neither

SOX nor Dodd-Frank preclude Becker from recovery. We affirm the trial court's

denial of Community Health Systems Inc.'s (CHS) CR 12(b)(6) motion, and affirm

the Court of Appeals in upholding that decision upon certified interlocutory

review.

FACTS

Becker began working for Rockwood Clinic PS, an acquired subsidiary of

CHS, 1 as its chief financial officer (CFO) in February 2011. As a publicly traded

company, CJ-IS is required to file reports with the United States Securities and

Exchange Commission (SEC). These reports are available publicly for the purpose

of accurately advising the SEC, and CHS' creditors and investors, of CHS'

profitability and business strategies. As Rockwood's CFO, Becker was required by

state and federal law to ensure that Rockwood's reports did not mislead the public,

which also required his personal verification that the reports did not contain any

inaccurate material facts or material omissions. As the CFO, Becker himself was

1 Rockwood is an acquired entity of CHS and does business as Community Health Systems Professional Services Corporation (CHSPS). CHS is a publically traded company incorporated in Delaware and licensed to do business in Washington. Becker's allegations are against CHS as the employer; however, the superior court dismissed CHS as a defendant, since CHS is a holding company with no contacts in Washington. CHSPS remains a party to the lawsuit.

2 Becker v. Cmty. Health Sys., Inc., No. 90946-6

potentially criminally liable for misleading reporting. In October 2011, Becker

submitted to CHS' financial department an "EBIDTA," a calculation of earnings

before interest, taxes, depreciation, and amortization-it serves as an important

measure of financial health for publically traded companies. Becker's EBIDTA

report projected a $12 million operating loss for Rockwood the upcoming year.

Unbeknownst to Becker, when CHS acquired Rockwood it represented to

creditors that the Rockwood acquisition would incur only a $4 million operating

loss. To cover the discrepancy, CHS' financial supervisors allegedly directed

Becker to correct his EBIDTA to reflect the targeted $4 million loss. CHS did not

provide a basis for its low calculation. Becker refused, fearing that the projection

would mislead creditors and investors in violation of SOX.

Soon after, Rockwood's chief executive officer (CEO) initiated an

unscheduled evaluation of Becker's performance in which the CEO marked him

with an unacceptable performance rating and placed him on a performance

improvement plan: As part of his improvement plan, Becker was directed to edit

the EBIDTA projected loss to reflect the $4 million valuation. The CEO made

clear that Becker's refusal to do so put his position in jeopardy.

Becker sought legal counsel and decided to report his concerns upward: he

wrote to CHS' and Rockwood's CEOs, explaining his concern that CHS was

attempting to misrepresent its projected budget in violation of financial reporting

3 Becker v. Onty. Health Sys., Inc., No. 90946-6

laws. He wrote that he felt compelled to resign unless CHS responded to his

concerns. The next day, CHS and Rockwood accepted Becker's resignation.

Becker filed two claims in Spokane County Superior Court: one for

wrongful discharge in violation of public policy and the other for a violation of

SOX. 2 CHS successfully removed the case to federal court, prompting Becker to

amend his complaint and omit his federal SOX claim. The federal court remanded

~· the case back to the state superior court. Becker's amended complaint alleged

wrongful discharge for Becker's refusal to violate financial reporting laws, which

resulted in economic and emotional distress damages.

CHS filed a CR 12(b)( 6) motion to dismiss the complaint for failure to state .. .

.a claim, contending that the jeopardy element of the tort had not been met because

there were adequate alternative means to protect the public policy of honesty in

corporate financial reporting. The trial court denied the motion, and CHS

successfully moved to have the question certified for interlocutory review under

RAP 2.3(b)(4). The Court of Appeals accepted review and determined that the

jeopardy element had been satisfied because the alternative administrative

enforcement mechanisms of SOX and Dodd-Frank were inadequate and therefore

2Becker also filed a whistle blower complaint with the United States Occupational Safety and Health Administration, but i.t was dismissed. His appeal on that matter will be heard in January 2016.

4 Becker v. Cmty. Health Sys., Inc., No. 90946-6

did not for~close th~ common law tort remedies for employees. Becker v. Cmty.

Health Sys., Inc., 182 Vvn. App. 935, 332 P.3d 1085 (2014), review granted, 182

Wn.2d 1009, 343 P.3d 759 (2015).

ANALYSIS

We review the trial court's ruling on a motion to dismiss de novo. Factual

allegations are accepted as true, and unless it appears beyond doubt that the

plaintiff can prove no set of facts consistent with the complaint that would entitle

him or her to relief, the motion to dismiss must be denied. Corrigal v. Ball & Dodd

Funeral Horne, Inc., 89 Wn.2d 959, 961, 577 P.2d 580 (1978).

We accepted re':':iew of these three cases-Becker, Rose, and Rickman-to

determine whether o.ther nonexclusive administrative remedies nevertheless

. preempt the tort for wrongful discharge when those statutes are "adequate" to

promote th~ public policy. In our decision in Rose, we determined that the

"adequacy of alternative remedies" analysis misapprehends the role of the common

law and the underlying purpose of the tort. When other statutory remedies provide

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